When benchmarking a firm's capital structure,management should compare it to
A)firms in S&P 500.
B)firms in the same geographic region.
C)firms recognized for the quality of their management.
D)firms in similar lines of business.

Question

Quizplus · Accepted Answer

Benchmarking a firm's capital structure against firms in similar lines of business provides a more accurate comparison, as capital structures are influenced by industry-specific factors such as risk, operating cycles, and growth opportunities. Comparing to firms in the same geographic region or recognized for quality of management may not take into account the nuances of the industry, and comparing to the S&P 500 may not be relevant if the firm operates in a niche market not represented by the index.

When Benchmarking a Firm's Capital Structure,management Should Compare It to